MuniYield California Fund, Inc.
Semi-Annual
Report
April 30, 1994
This report, including the financial information herein, is
transmitted to the shareholders of MuniYield California Fund,
Inc. for their information. It is not a prospectus, circular
or representation intended for use in the purchase of shares
of the Fund or any securities mentioned in the report. Past
performance results shown in this report should not be consider-
ed a representation of future performance. The Fund has lever-
aged its Common Stock by issuing Preferred Stock to provide
the Common Stock shareholders with a potentially higher rate
of return. Leverage creates risks for Common Stock shareholders,
including the likelihood of greater volatility of net asset
value and market price of shares of the Common Stock, and the
risk that fluctuations in the short-term dividend rates of the
Preferred Stock may affect the yield to Common Stock share-
holders.
MuniYield California Fund, Inc.
Box 9011
Princeton, NJ
08543-9011
MuniYield California Fund, Inc.
TO OUR SHAREHOLDERS
For the six-month period ended April 30, 1994, the Common Stock
of MuniYield California Fund, Inc. earned $0.556 per share in-
come dividends, which includes earned and unpaid dividends of
$0.078. This represents a net annualized yield of 7.57%, based
on a month-end net asset value of $14.81 per share. Over the same
period, total investment return on the Fund's Common Stock was
- -7.37%, based on a change in per share net asset value from $16.60
to $14.81, and assuming reinvestment of $0.566 per share income
dividends.
<PAGE>
For the six-month period ended April 30, 1994, the Fund's Auction
Market Preferred Stock had an average yield of 2.66% for Series A
and 2.24% for Series B.
The Environment
Inflationary expectations and investor sentiment changed for the
worse during the three-month period ended April 30, 1994. Follow-
ing stronger-than-expected economic results through year-end 1993,
the Federal Reserve Board broke with tradition on February 4, 1994
and publicly announced a modest 25 basis point (0.25%) increase in
short-term interest rates. At the March 22, 1994 meeting of the Fed-
eral Open Market Committee, the Federal Reserve Board again raised
the Federal Funds rate by 25 basis points, followed by another 25
basis point increase on April 18, 1994.
Rather than view the Federal Reserve Board's first tightening move
as a preemptive strike against inflation, fixed-income investors
focused on Chairman Greenspan's implicit promise of further tight-
ening should the rate of inflation accelerate, and bond prices
declined sharply. The setback in the bond market was also reflect-
ed in greater stock market volatility. While the second and third
increases in the Federal Funds rate were less of a surprise, in-
vestors remained concerned that interest rates would trend up-
ward sharply as the central bank aggressively attempted to contain
the inflationary pressures of an improving economy. At the same
time, highly leveraged investors were forced to liquidate posi-
tions in the face of declining stock and bond prices. Investor
confidence was not restored with the announcement of the surpris-
ingly slow 2.6% gross domestic product growth rate for the first
calendar quarter of 1994. Instead, investors focused on the higher-
than-expected (but still moderate) broad inflation measures and
became concerned that business activity was beginning to stagnate
as inflationary pressures were increasing.
The Municipal Market
During the six months ended April 30, 1994, tax-exempt bond yields
exhibited considerable volatility as they rose to their highest level
in the past two years. As measured by the Bond Buyer Revenue Bond In-
dex, the yield on newly issued municipal bonds maturing in 30 years
rose over 90 basis points to 6.42% by the end of April. Yields on
seasoned municipal revenue bonds rose by over 100 basis points in
sympathy with the equally dramatic increase in long-term US Treas-
ury bond yields. By the end of April, yields on US Treasury secur-
ities rose by over 95 basis points to aproximately 7.30%.
<PAGE>
Long-term tax-exempt bond yields were essentially unchanged from
the end of October 1993 to the end of January 1994. However, on a
weekly basis, tax-exempt bond yields fluctuated by as much as 15
basis points as investors were unable to reconcile the rapid eco-
nomic growth seen late last year with continued low inflation.
Following the initial interest rate increase by the Federal Re-
serve Board in early February, municipal bond prices began to
erode in concert with taxable bond prices as investors began to
sell securities in anticipation of further interest rate in-
creases. This fear led investors to withdraw from the tax-ex-
empt market. From early February to the end of March, total
assets of all tax-exempt bond funds declined by $14 billion to
$247 billion. This decline in investor demand, coupled with fears
that the robust economic recovery seen during the fourth quarter
of 1993 would continue well into 1994, helped push municipal bond
yields higher in February and March. Attracted by tax-exempt
yields in excess of 6.25%, investor demand returned in April,
allowing yields to decline approximately 15 basis points to end
the April period at approximately 6.40%.
A rise in tax-exempt bond yields the magnitude of that exper-
ienced over the past six months has not been seen since 1987
when municipal bond rates rose 250 basis points between March
and October of that year. It is very important to note that the
recent municipal bond price declines were largely the result of
consistent and insistent selling pressures over the last two
months. In 1987, the tax-exempt bond market was much more vol-
atile and, at times, chaotic as investors sought to liquidate
positions without concern for fundamental value. For the most
part, the recent price deterioration has been orderly, and the
municipal bond market's liquidity and integrity have not been
challenged or jeopardized.
To a large extent, the municipal bond market has continued to be
supported by its strong technical position. New-issue volume for
the last six months has been less than $105 billion. This rep-
resents a decline of approximately 20% versus the comparable
period a year ago. This decline was expected and has been dis-
cussed in previous shareholder reports. This reduced issuance
has minimized potential selling pressure in recent months since
institutional investors have been wary of selling appreciable
amounts of securities that they may be unable to replace later
this year at any price level. We expect this decline in issuance
to continue since we anticipate recent yield increases to sig-
nificantly impact future municipal bond issuance.
<PAGE>
Despite recent price declines, tax-exempt securities remain among
the most attractive investment alternatives available. After the
recent yield increases, longer-term municipal securities yield
approximately 90% of comparable US Treasury yields. Purchasers of
these municipal bonds also accrue substantial after-tax yield
advantages. To investors in the 39% marginal Federal income tax
bracket, the purchase of a municipal bond yielding 6.50% rep-
resents an after-tax equivalent of 10.65%. With prevailing est-
imates of 1994 inflation at no more than 3%--4%, real after-
tax rates in excess of 6.50% easily compensate longer-term in-
vestors for much of the price volatility recently experienced.
Portfolio Strategy
During the six-month period ended April 30, 1994, we restructured
MuniYield California Fund, Inc.'s portfolio slightly, selling a
portion of its prerefunded positions. The recent volatility in
the fixed-income market created a substantial back up in yields.
We used this situation to reinvest the proceeds of the prerefund-
ed sales in longer-term California municipal bonds, which we ex-
pect to afford the Fund better price appreciation should the bond
market stabilize later this year.
Narrow quality spreads have given us the opportunity to concen-
trate our reinvestments in issues rated AA or better without sac-
rificing current return. In response to the favorable technical
positions of the short-term marketplace, we are allowing one ser-
ies of the Fund's Preferred Stock to have weekly interest rate
resets in order to seek to enhance the additional yield realized
by our Common Stock shareholders. Conversely, should short-term
interest rates in the State of California rise because of a re-
versal of the strong technical condition of the current market-
place, weekly interest rate resets would mean that the Common
Stock would experience a faster lessening of the current yield
generated by the leverage effect. Dividends paid to Preferred
Stock shareholders are significantly lower than the income earn-
ed on the Fund's long-term investments, and therefore the Common
Stock shareholders are the beneficiaries of the incremental yield.
Should the interest rate differential between short-term and long-
term interest rates narrow because of a rise in short-term in-
terest rates, the incremental yield "pick up" on the Common Stock
will be reduced. Furthermore, if long-term interest rates rise,
the Common Stock's net asset value will reflect the full decline
in the entire portfolio holdings, since the value of the Fund's
Preferred Stock does not fluctuate. During the six-month period
ended April 30, 1994, long-term interest rates rose, reflected
in the decline in the net asset value of the Fund's Common Stock.
We anticipate maintaining a relatively fully invested posture to
be in the position to take advantage of improving conditions for
the fixed-income markets should this scenario unfold later in 1994.
(For a complete explanation of leveraging, see page 3 of this re-
port to shareholders.)
<PAGE>
Sincerely,
(Arthur Zeikel)
Arthur Zeikel
President
(Vincent R. Giordano)
Vincent R. Giordano
Vice President and Portfolio Manager
May 31, 1994
THE BENEFITS AND RISKS OF LEVERAGING
MuniYield California Fund, Inc. utilizes leveraging to seek to
enhance the yield and net asset value of its Common Stock. How-
ever, these objectives cannot be achieved in all interest rate
environments. To leverage, the Fund issues Preferred Stock, which
pays dividends at prevailing short-term interest rates, and
invests the proceeds in long-term municipal bonds. The interest
earned on these investments is paid to Common Stock shareholders
in the form of dividends, and the value of these portfolio
holdings is reflected in the per share net asset value of the
Fund's Common Stock. However, in order to benefit Common Stock
shareholders, the yield curve must be positively sloped; that is,
short-term interest rates must be lower than long-term interest
rates. At the same time, a period of generally declining interest
rates will benefit Common Stock shareholders. If either of these
conditions change, then the risks of leveraging will begin to
outweigh the benefits.
To illustrate these concepts, assume a fund's Common Stock cap-
italization of $100 million and the issuance of Preferred Stock
for an additional $50 million, creating a total value of $150
million available for investment in long-term municipal bonds.
If prevailing short-term interest rates are approximately 3% and
long-term interest rates are approximately 6%, the yield curve
has a strongly positive slope. The fund pays dividends on the
$50 million of Preferred Stock based on the lower short-term
interest rates. At the same time, the fund's total portfolio of
$150 million earns the income based on long-term interest rates.
<PAGE>
In this case, the dividends paid to Preferred Stock shareholders
are significantly lower than the income earned on the fund's
long-term investments, and therefore the Common Stock shareholders
are the beneficiaries of the incremental yield. However, if short-
term interest rates rise, narrowing the differential between short-
term and long-term interest rates, the incremental yield pick-up
on the Common Stock will be reduced. At the same time, the market
value of the fund's Common Stock (that is, its price as listed
on the New York Stock Exchange) may, as a result, decline. Further-
more, if long-term interest rates rise, the Common Stock's net
asset value will reflect the full decline in the price of the port-
folio's investments, since the value of the fund's Preferred Stock
does not fluctuate. In addition to the decline in net asset value,
the market value of the fund's Common Stock may also decline.
PORTFOLIO ABBREVIATIONS
To simplify the listings of MuniYield California Fund, Inc.'s port-
folio holdings in the Schedule of Investments, we have abbreviated
the names of many of the securities according to the list at right.
AMT Alternative Minimum Tax (subject to)
COP Certificates of Participation
DATES Daily Adjustable Tax-Exempt Securities
GO General Obligation Bonds
HFA Housing Finance Authority
PCR Pollution Control Revenue Bonds
RIB Residual Interest Bonds
S/F Single-Family
UPDATES Unit Priced Demand Adjustable Tax-Exempt Securities
UT Unlimited Tax
VRDN Variable Rate Demand Notes
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California--94.9%
<S> <S> <C> <S> <C>
A1 VMIG1 $ 300 Anaheim, California, COP, Refunding, 1993 Series, VRDN, 3.35% due 8/01/2019 (a)(b) $ 300
AAA Aaa 5,000 Anaheim, California, Public Financing Authority Revenue Bonds (Electric Utilities San
Juan 4), Second Series, 5.75% due 10/01/2022 (d) 4,638
AAA Aaa 1,500 Brea, California, Public Financing Authority, Water Revenue Bonds, Series B, 6.25%
due 7/01/2021 (d) 1,494
A- Baa1 1,500 Burbank, California, Redevelopment Agency, Tax Allocation Refunding Bonds, Series A,
6% due 12/01/2023 1,378
California Educational Facilities Authority Revenue Bonds:
NR Baa1 1,775 (Mills College), 6.875% due 9/01/2022 1,774
AA Aa 1,000 (University of Southern California Project), Series B, 6.75% due 10/01/2015 1,029
California Health Facilities Financing Authority Revenue Bonds:
A1+ NR 2,000 (Huntington Memorial Hospital), VRDN, 3.15% due 11/01/2010 (a) 2,000
AA Aa2 1,000 (Kaiser Permanente Medical Care Program), Series A, 7% due 12/01/2010 1,049
AA Aa2 2,500 (Kaiser Permanente Medical Care Program), Series A, 6.75% due 10/01/2019 2,564
AAA Aaa 1,000 Refunding (Adventist Health), Series A, 6.50% due 3/01/2014 (c) 1,020
AA Aa2 1,000 Refunding (Kaiser Permanente Medical Care Program), Series A, 6.25% due 3/01/2021 971
A1+ VMIG1 300 Refunding (Memorial Health Services), VRDN, 3.20% due 10/01/2024 (a) 300
A+ A1 3,600 Refunding (Sutter Health), Series 89A, 6.70% due 1/01/2013 3,695
AA- UR* 1,000 (Saint Joseph Health System), Series A, 6.75% due 7/01/2001 (g) 1,102
California HFA, Home Mortgage Revenue Bonds:
A+ Aa 5,375 AMT, Series C, 7.45% due 8/01/2011 5,596
A+ Aa 1,915 Series D, 7.25% due 8/01/2017 1,956
A+ Aa 1,165 Series F, 7.875% due 8/01/2019 1,197
A+ Aa 3,000 California HFA, Revenue Bonds, AMT, RIB, 9.621% due 8/01/2023 (h) 3,023
California Pollution Control Financing Authority, PCR, Refunding:
A1+ VMIG1 500 (Shell Oil Co. Project), VRDN, Series B, 2.80% due 10/01/2011 (a) 500
A+ Aa3 8,000 (Southern California Edison), 6.85% due 12/01/2008 8,242
California Pollution Control Financing Authority, Resource Recovery Revenue Bonds
(Honey Lake Power Project), AMT, VRDN (a):
NR P1 200 3% due 9/01/2018 200
NR Aa1 200 3% due 9/01/2018 200
<PAGE>
NR P1 200 California Pollution Control Financing Authority, Resource Recovery Revenue Refunding
Bonds (Ultra Power-Rocklin), Series A, AMT, VRDN, 3.10% due 6/01/2017 (a) 200
California Public Works Board, Lease Revenue Bonds, Series A:
A A1 3,000 (California Community Colleges), 6.75% due 9/01/2011 3,073
A A1 4,500 (Various California State University Projects), 6.625% due 10/01/2010 4,593
A A1 9,800 (Various California State University Projects), 6.70% due 10/01/2017 9,924
California State Department of Water Resources Revenue Bonds (Central Valley Project):
AA Aa 8,670 Refunding, Series L, 5.625% due 12/01/2012 8,133
AA Aa 5,000 Refunding, Series L, 5.50% due 12/01/2023 4,421
AA Aa 5,500 RIB, 8.713% due 12/01/2021 (h) 4,971
AA Aaa 6,950 Series I, 6.60% due 12/01/2000 (g) 7,543
AA Aa 2,100 Series J-2, 6.125% due 12/01/2013 2,082
AA Aa 1,510 Series J-2, 5.50% due 12/01/2022 1,347
AA Aa 1,630 Series J-3, 6.125% due 12/01/2013 1,616
California Statewide Community Development Authority Revenue Bonds:
AAA Aaa 5,000 COP (J. Paul Getty), 5% due 10/01/2023 4,140
AAA Aaa 3,000 Refunding (Oakland Convention Centers Project), 6% due 10/01/2010 (b) 2,991
NR Baa1 5,895 Concord, California, Redevelopment Agency, Tax Allocation Refunding Bonds (Central
Concord Redevelopment Project), Sub-Series A, 6% due 7/01/2019 5,538
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
A+ A $ 6,465 Contra Costa, California, Water District, Water Revenue Bonds, 6.75% due 10/01/2000 (g) $ 7,110
A+ A1 3,000 Contra Costa County, California, COP (Merrithew Memorial Hospital), 6.60% due
11/01/2012 3,013
BBB NR 1,000 Contra Costa County, California, Public Financing Authority, Tax Allocation Revenue
Refunding Bonds, Series A, 7.10% due 8/01/2022 1,011
AAA Aaa 395 Culver City, California, Redevelopment Finance Authority Revenue Bonds (Senior
Lien Project Loans), Series A, 6.75% due 11/01/2015 (b) 405
AAA Aaa 2,150 Culver City, California, Wastewater Facilities Revenue Bonds, Series A, 6.75%
due 9/01/2016 (d) 2,226
AAA Aaa 2,000 Eastern Municipal Water District, California, Water and Sewer Revenue Bonds,
COP, Series A, 5.375% due 7/01/2013 (d) 1,810
<PAGE>
A- NR 3,000 Foster City, California, Public Financing Authority Revenue Bonds (Foster City
Community Development Project Loan), Series A, 6% due 9/01/2013 2,795
BBB NR 1,500 Fresno, California, Joint Powers Financing Authority, Local Agency Revenue Refunding
Bonds, Series A, 6.559% due 9/02/2012 1,449
Huntington Beach, California, Public Financing Authority, Revenue Refunding Bonds
(Huntington Beach Redevelopment Project ):
NR Baa 1,600 7% due 8/01/2010 1,614
NR Baa 7,500 7% due 8/01/2024 7,504
BBB Baa 1,980 Inglewood, California, Public Financing Authority Revenue Bonds (Manchester-Praire-
North Inglewood & Industrial Park Project), Series B, 7% due 5/01/2022 1,975
A1+ VMIG1 200 Irvine, California, Improvement Board Act of 1915, UPDATES (Assessment District Number
89-10), 2.95% due 9/02/2015 (h) 200
Irvine Ranch, California, Water District Consolidated Revenue Bonds, DATES (a):
A-1 NR 700 Series B, 2.90% due 10/01/2005 700
A-1 NR 1,300 Series C, 2.90% due 10/01/2010 1,300
A1+ VMIG1 4,000 Irvine Ranch, California, Water District, COP (Capital Improvement Project), VRDN,
2.95% due 8/01/2016 (a) 4,000
A-1 VMIG1 1,200 Irvine Ranch, California, Water District, District Numbers 140-240-105-250, VRDN,
3% due 4/01/2033 (a) 1,200
A A 6,000 Los Angeles, California, Community Redevelopment Agency, Tax Allocation Bonds
(Bunker Hill Project), Series E, 6.65% due 12/01/2001 (g) 6,577
Los Angeles, California, Department of Water and Power, Electric Plant Revenue Bonds:
AA Aa 2,000 Refunding, 5.75% due 9/01/2013 1,891
AA Aa 1,000 Refunding, 6.375% due 2/01/2020 999
AA Aa 1,370 (Second Issue), 7.25% due 9/15/2030 1,528
Los Angeles, California, Wastewater System Revenue Bonds:
AAA Aaa 7,000 Refunding, Series D, 4.70% due 11/01/2019 (d) 5,565
AAA Aaa 5,000 Series B, 6% due 6/01/2022 (b) 4,816
AAA Aaa 3,000 Series D, 6.625% due 12/01/2012 (c) 3,086
Los Angeles County, California, COP:
AAA Aaa 4,000 (Correctional Facilities Project), 6.50% due 9/01/2013 (c) 4,061
NR NR 2,000 (Marina del Rey), Series A, 6.25% due 7/01/2003 2,014
Los Angeles County, California, Metropolitan Transportation Authority, Sales Tax
Revenue Refunding Bonds:
AAA Aaa 5,000 Proposition A, Series A, 5% due 7/01/2021 (d) 4,142
A1 VMIG1 800 Proposition C, Second Series, VRDN, Series A, 3% due 7/01/2020 (a)(c) 800
</TABLE>
<PAGE>
<TABLE>
SCHEDULE OF INVESTMENTS (continued) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (continued)
<S> <S> <C> <S> <C>
AA Aa $ 5,700 Los Angeles County, California, Sanitation Districts, Financing Authority Revenue
Bonds (Capital Projects), Series A, 5% due 10/01/2023 $ 4,664
Los Angeles County, California, Transportation Commission, Sales Tax Revenue Bonds,
Series A:
AAA Aaa 2,500 6.75% due 7/01/2001 (d)(g) 2,765
A+ Aaa 6,800 6.75% due 7/01/2001 (g) 7,522
A+ Aaa 3,500 6.90% due 7/01/2001 (g) 3,880
AAA Aaa 1,500 Proposition C, Second Series, 6.25% due 7/01/2013 (c) 1,508
A+ A1 2,000 Refunding, 7% due 7/01/2019 2,068
Metropolitan Water District, Southern California, Waterworks Revenue Bonds:
AA NR 6,000 6.75% due 7/01/2001 (g) 6,637
AA Aa 4,000 6.625% due 7/01/2012 4,123
AA Aa 3,615 5.50% due 7/01/2019 3,248
AA Aa 1,200 Refunding, RIB, 8.028% due 10/30/2020 (h) 963
M-S-R Public Power Agency, California, Revenue Bonds (San Juan Project):
A A 5,000 Series C, 6.875% due 7/01/2019 5,084
AAA Aaa 2,955 Series E, 6.50% due 7/01/2017 (c) 2,997
AAA Aaa 2,500 Northern California Power Agency, Multiple Capital Facilities Revenue Bonds, RIB,
10.105% due 9/02/2025 (c)(h) 2,606
A-1 NR 1,100 Orange County, California, COP (Office and Courthouse Project), VRDN, 2.90% due
12/01/2015 (a) 1,100
AAA Aaa 8,000 Orange County, California, Local Transportation Authority, Sales Tax Revenue Bonds,
RIB, Second Series, 9.023% due 2/14/2011 (d)(h) 7,980
A1+ VMIG1 1,500 Orange County, California, Various Sanitation Districts, COP, VRDN, 2.95% due
8/01/2015 (a) 1,500
AAA Aaa 5,380 Palmdale, California, Civic Authority Revenue Refunding Bonds (Redevelopment Project
Number 1), Series A, 5.50% due 7/01/2023 (c) 4,808
A+ A1 5,000 Pasadena, California, COP, Refunding (Old Pasadena Package Facility Project),
6.25% due 1/01/2018 4,915
AAA Aaa 5,435 Pittsburg, California, Redevelopment Agency, Tax Allocation Bonds (Los Medanos
Community Development Project), 4.625% due 8/01/2021 (b) 4,238
<PAGE>
NR A 3,750 Rancho Mirage, California, Joint Powers Financing Authority, COP (Eisenhower Memorial
Hospital), 7% due 3/01/2022 3,803
Redwood City, California, Public Financing Authority, Local Agency Revenue Bonds:
AAA Aaa 5,025 Refunding, Series A, 6.50% due 7/15/2011 (b) 5,143
A- NR 1,500 Series B, 7.25% due 7/15/2011 1,585
A+ NR 18,000 Sacramento, California, City Financing Authority Revenue Bonds, 6.80% due
11/01/2001 (g) 19,944
Sacramento County, California, Sanitation District Financing Authority, Revenue Re-
funding Bonds:
AA Aa 1,400 5% due 12/01/2016 1,185
AA Aa 2,450 4.75% due 12/01/2023 1,922
A+ Aa3 5,000 San Diego, California, Industrial Development Revenue Refunding Bonds (San Diego Gas
& Electric), Series C, 5.90% due 9/01/2018 4,658
San Francisco, California, City and County Airport Commission, International Airport
Revenue Bonds:
AAA Aaa 11,000 Refunding, Second Series, Issue 1, 6.50% due 5/01/2013 (b) 11,235
AAA Aaa 2,500 Second Series, Issue 5, 6.50% due 5/01/2024 (d) 2,455
</TABLE>
<TABLE>
SCHEDULE OF INVESTMENTS (concluded) (in Thousands)
<CAPTION>
S&P Moody's Face Value
Ratings Ratings Amount Issue (Note 1a)
California (concluded)
<S> <S> <C> <S> <C>
AA- A1 $ 5,480 San Francisco, California, City and County, GO, UT (Variable Purpose Projects),
Series A, 6.50% due 12/15/2010 $ 5,610
A+ A1 2,000 San Jose, California, Financing Authority Revenue Bonds (Convention Center Refunding
Project), Series C, 6.30% due 9/01/2010 2,000
A1+ NR 1,190 San Mateo County, California, COP, Series B, VRDN, 3.40% due 7/01/1998 (a) 1,190
AAA Aaa 5,000 Santa Ana, California, Financing Authority, Lease Revenue Bonds, Police Administration
and Holdings Facilities, Series A, 6.25% due 7/01/2024 (c) 5,013
AAA Aaa 3,180 Santa Clara, California, Electric Revenue Bonds, Series A, 6.50% due 7/01/2021 (c) 3,226
AA A1 5,000 Santa Clara County, California, Transit District, Sales Tax Revenue Bonds, Series A,
6.75% due 6/01/2011 5,160
AAA Aaa 1,525 Santa Clara Valley, California, Water District, COP, 6.60% due 2/01/2015 (c) 1,569
<PAGE>
AAA Aaa 3,000 Santa Fe Springs, California, Redevelopment Agency, Tax Allocation Bonds (Conservation
Redevelopment Project), Series A, 6% due 9/01/2014 (c) 2,907
AAA Aaa 7,750 Santa Rosa, California, Water Revenue Bonds (Sub-Regional Wastewater Project), Series A,
6.50% due 9/01/2022 (d) 7,865
AAA NR 1,145 Southern California Home Financing Authority, S/F Mortgage Revenue Bonds, AMT, Series A,
6.75% due 9/01/2022 (e)(f) 1,150
Southern California Public Power Authority, Power Revenue Bonds (Multiple Projects):
A Aaa 405 7% due 7/01/2000 (g) 448
A A 180 7% due 7/01/2009 186
Southern California Public Power Authority Revenue Bonds (Transmission Project):
AA- Aa 2,000 Refunding, 5.75% due 7/01/2021 1,843
AA- Aa 1,400 RIB, 8.925% due 7/01/2012 (h) 1,339
University of California, Revenue Refunding Bonds (Multiple Purpose Projects):
A- A 3,300 Series A, 6.875% due 9/01/2002 (g) 3,691
AAA Aaa 3,950 Series C, 5.25% due 9/01/2012 (b) 3,530
Puerto Rico--4.5%
BBB Baa 950 Puerto Rico Commonwealth, Aqueduct and Sewer Authority Revenue Bonds, Series A,
7% due 7/01/2019 1,012
Puerto Rico Electric Power Authority, Power Revenue Refunding Bonds:
A- Baa1 4,425 Series N, 7.125% due 7/01/2014 4,743
A- Baa1 2,985 Series P, 7% due 7/01/2021 3,204
A- Baa1 5,350 Series R, 6.25% due 7/01/2017 5,253
A- Baa1 2,000 Series S, 7% due 7/01/2007 2,161
Total Investments (Cost--$363,777)--99.4% 366,227
Other Assets Less Liabilities--0.6% 2,294
--------
Net Assets--100.0% $368,521
========
<FN>
(a) The interest rates are subject to change periodically based
upon prevailing market rates. The interest rates shown
are those in effect at April 30, 1994.
(b) AMBAC Insured
(c) MBIA Insured.
(d) FGIC Insured.
(e) GNMA Collateralized.
(f) FNMA Collateralized.
(g) Prerefunded.
(h) The interest rate is subject to change periodically and
inversely to the prevailing market rate. The interest rates
shown are the rates in effect at April 30, 1994.
* Under Review.
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION
Statement of Assets, Liabilities and Capital as of April 30, 1994
<TABLE>
<CAPTION>
<S> <S> <C> <C>
Assets: Investments, at value (identified cost--$363,776,656) (Note 1a) $366,227,095
Cash 2,211,790
Receivables:
Interest $ 6,563,071
Securities sold 3,438,923 10,001,994
------------
Deferred organization expenses (Note 1e) 19,267
Prepaid expenses 26,023
------------
Total assets 378,486,169
------------
Liabilities: Payables:
Securities purchased 9,069,059
Dividends to shareholders (Note 1g) 657,460
Investment adviser (Note 2) 145,748 9,872,267
------------
Accrued expenses 92,728
------------
Total liabilities 9,964,995
------------
Net Assets: Net assets $368,521,174
============
Capital: Capital Stock (200,000,000 shares authorized) (Note 4):
Preferred Stock, par value $.10 per share (2,400 shares of AMPS*
issued and outstanding at $50,000 per share liquidation preference) $120,000,000
Common Stock, par value $.10 per share (16,781,559 shares issued
and outstanding) $ 1,678,156
Paid-in capital in excess of par 233,789,721
Undistributed investment income--net 2,509,047
Undistributed realized capital gains--net 8,093,811
Unrealized appreciation on investments--net 2,450,439
------------
Total--Equivalent to $14.81 net asset value per share of Common Stock
(market price--$13.625) 248,521,174
------------
Total capital $368,521,174
============
<FN>
* Auction Market Preferred Stock.
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statement of Operations
<CAPTION>
For the Six Months
Ended April 30, 1994
<S> <S> <C> <C>
Investment Income Interest and amortization of premium and discount earned. $ 11,474,348
(Note 1d):
Expenses: Investment advisory fees (Note 2) $ 964,875
Commission fees (Note 4) 148,643
Professional fees 35,290
Accounting services (Note 2) 19,538
Transfer agent fees 18,401
Printing and shareholder reports 17,952
Custodian fees 14,561
Listing fees 12,182
Directors' fees and expenses 11,255
Pricing fees 5,716
Amortization of organization expenses (Note 1e) 2,872
Other 10,332
------------
Total expenses 1,261,617
------------
Investment income--net 10,212,731
------------
Realized & Realized gain on investments--net 8,093,835
Unrealized Gain Change in unrealized appreciation/depreciation on investments--net (37,178,199)
(Loss) on ------------
Investments--Net Net Decrease in Net Assets Resulting from Operations $(18,871,633)
(Notes 1d & 3): ============
See Notes to Financial Statements.
</TABLE>
FINANCIAL INFORMATION (continued)
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
For the Six For the
Months Ended Year Ended
April 30, October 31,
Increase (Decrease) in Net Assets: 1994 1993
<S> <S> <C> <C>
Operations: Investment income--net $ 10,212,731 $ 20,280,402
Realized gain on investments--net 8,093,835 1,294,043
Change in unrealized appreciation/depreciation on investments--net (37,178,199) 42,476,677
------------ ------------
Net increase (decrease) in net assets resulting from operations (18,871,633) 64,051,122
------------ ------------
Dividends & Investment income--net:
Distributions to Common Stock (8,368,107) (16,558,026)
Shareholders Preferred Stock (1,466,868) (2,963,328)
(Note 1g): Realized gain on investments--net:
Common Stock (1,122,166) (1,322,361)
Preferred Stock (171,888) (323,088)
------------ ------------
Net decrease in net assets resulting from dividends and distributions
to shareholders (11,129,029) (21,166,803)
------------ ------------
Capital Stock Value of shares issued to Common Stock shareholders in reinvestment
Transactions of dividends -- 2,135,067
(Note 4): ------------ ------------
Net increase in net assets derived from capital stock transactions -- 2,135,067
------------ ------------
Net Assets: Total increase (decrease) in net assets (30,000,662) 45,019,386
Beginning of period 398,521,836 353,502,450
------------ ------------
End of period* $368,521,174 $398,521,836
============ ============
<FN>
*Undistributed investment income--net $ 2,509,047 $ 2,131,291
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
FINANCIAL INFORMATION (concluded)
<TABLE>
Financial Highlights
<CAPTION>
For the
Period
The following per share data and ratios have been derived For the Six For the Feb. 28,
from information provided in the financial statements. Months Ended Year Ended 1992++ to
April 30, October 31, October 31,
Increase (Decrease) in Net Asset Value: 1994 1993 1992
<S> <S> <C> <C> <C>
Per Share Net asset value, beginning of period $ 16.60 $ 14.03 $ 14.18
Operating --------- --------- ---------
Performance: Investment income--net .61 1.22 .77
Realized and unrealized gain (loss) on investments--net (1.73) 2.62 (.07)
--------- --------- ---------
Total from investment operations (1.12) 3.84 .70
--------- --------- ---------
Less dividends and distributions to Common Stock
shareholders:
Investment income--net (.50) (.99) (.55)
Realized gain on investments--net (.07) (.08) --
--------- --------- ---------
Total dividends and distributions to Common Stock
shareholders (.57) (1.07) (.55)
--------- --------- ---------
Capital charge resulting from issuance of Common Stock -- -- (.02)
--------- --------- ---------
Effect of Preferred Stock activity++++:
Dividends and distributions to Preferred Stock
shareholders:
Investment income--net (.09) (.18) (.14)
Realized gain on investments--net (.01) (.02) --
Capital charge resulting from issuance of Preferred Stock -- -- (.14)
--------- --------- ---------
Total effect of Preferred Stock activity (.10) (.20) (.28)
--------- --------- ---------
Net asset value, end of period $ 14.81 $ 16.60 $ 14.03
========= ========= =========
Market price per share, end of period $ 13.625 $ 15.625 $ 14.50
========= ========= =========
Total Investment Based on market price per share (9.46%)+++ 15.56% 0.43%+++
Return:** ========= ========= =========
Based on net asset value per share (7.37%)+++ 26.88% 2.79%+++
========= ========= =========
<PAGE>
Ratios to Average Expenses, net of reimbursement .65%* .69% .54%*
Net Assets:*** ========= ========= =========
Expenses .65%* .69% .71%*
========= ========= =========
Investment income--net 5.28%* 5.35% 5.65%*
========= ========= =========
Supplemental Net assets, net of Preferred Stock, end of period
Data: (in thousands) $ 248,521 $ 278,522 $ 233,502
========= ========= =========
Preferred Stock outstanding, end of period (in thousands) $ 120,000 $ 120,000 $ 120,000
========= ========= =========
Portfolio turnover 33.50% 21.68% 28.75%
========= ========= =========
Dividends Per Share Series A--Investment income--net $ 711 $ 1,093 $ 898
On Preferred Series B--Investment income--net 511 1,376 962
Stock Outstanding:
<FN>
* Annualized.
** Total investment returns based on market value, which
can be significantly greater or lesser than the net
asset value, result in substantially different returns.
Total investment returns exclude the effects of sales
loads.
*** Do not reflect the effect of dividends to Preferred Stock
shareholders.
++ Commencement of Operations.
++++ The Fund's Preferred Stock was issued on April 10, 1992.
+++ Aggregate total investment return.
See Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies:
MuniYield California Fund, Inc. (the "Fund") is registered under
the Investment Company Act of 1940 as a non-diversified, closed-
end management investment company. The Fund determines and makes
available for publication the net asset value of its Common Stock
on a weekly basis. The Fund's Common Stock is listed on the New
York Stock Exchange under the symbol MYC. The following is a sum-
mary of significant accounting policies followed by the Fund.
(a) Valuation of investments--Municipal bonds are traded primar-
ily in the over-the-counter markets and are valued at the most
recent bid price or yield equivalent as obtained by the Fund's
pricing service from dealers that make markets in such securities.
Financial futures contracts, which are traded on exchanges, are
valued at their closing prices as of the close of such exchanges.
Options, which are traded on exchanges, are valued at their last
sale price as of the close of such exchanges or, lacking any sales,
at the last available bid price. Securities with sixty days or
less to maturity are valued at amortized cost, which approximates
market value. Securities for which market quotations are not read-
ily available are valued at their fair value as determined in good
faith by or under the direction of the Board of Directors of the
Fund.
(b) Financial futures contracts--The Fund may purchase or sell
interest rate futures contracts and options on such futures con-
tracts for the purpose of hedging the market risk on existing
securities or the intended purchase of securities. Futures con-
tracts are contracts for delayed delivery of securities at a
specific future date and at a specific price or yield. Upon en-
tering into a contract, the Fund deposits and maintains as collat-
eral such initial margin as required by the exchange on which
the transaction is effected. Pursuant to the contract, the Fund
agrees to receive from or pay to the broker an amount of cash
equal to the daily fluctuation in value of the contract. Such
receipts or payments are known as variation margin and are re-
corded by the Fund as unrealized gains or losses. When the con-
tract is closed, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time
it was opened and the value at the time it was closed.
(c) Income taxes--It is the Fund's policy to comply with the re-
quirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute substantially all of its
taxable income to its shareholders. Therefore, no Federal income
tax provision is required.
<PAGE>
(d) Security transactions and investment income--Security trans-
actions are recorded on the dates the transactions are entered
into (the trade dates). Interest income is recognized on the accru-
al basis. Discounts and market premiums are amortized into interest
income. Realized gains and losses on security transactions are de-
termined on the identified cost basis.
(e) Deferred organization expenses--Deferred organization expenses
are amortized on a straight-line basis over a five-year period.
(f) Non-income producing investments--Written and purchased
options are non-income producing investments.
(g) Dividends and distributions--Dividends from net investment
income are declared and paid monthly. Distributions of capital
gains are recorded on the ex-dividend dates.
2. Investment Advisory Agreement and Transactions with
Affiliates:
The Fund has entered into an Investment Advisory Agreement with
Fund Asset Management, L.P. ("FAM"). Effective January 1, 1994,
the investment advisory business of FAM was reorganized from a
corporation to a limited partnership. Both prior to and after the
reorganization, ultimate control of FAM was vested with Merrill
Lynch & Co., Inc. ("ML & Co.").
The general partner of FAM is Princeton Services, Inc., an in-
direct wholly-owned subsidiary of ML & Co. The limited partners
are ML & Co. and Merrill Lynch Investment Management, Inc. ("MLIM"),
which is also an indirect wholly-owned subsidiary of ML & Co.
FAM is responsible for the management of the Fund's portfolio and
provides the necessary personnel, facilities, equipment and
certain other services necessary to the operations of the Fund.
For such services, the Fund pays a monthly fee at an annual rate
of 0.50% of the Fund's average weekly net assets.
Accounting services are provided to the Fund by FAM at cost.
Certain officers and/or directors of the Fund are officers and/or
directors of FAM, MLIM, Merrill Lynch, Pierce, Fenner & Smith
Inc. ("MLPF&S"), and/or ML & Co.
3. Investments:
Purchases and sales of investments, excluding short-term secur-
ities, for the six months ended April 30, 1994 were $124,397,775
and $134,828,092, respectively.
<PAGE>
Net realized and unrealized gains (losses) as of April 30, 1994
were as follows:
Realized
Gains Unrealized
(Losses) Gains
Long-term investments $8,774,955 $ 2,450,439
Short-term investments (681,120) --
---------- -----------
Total $8,093,835 $ 2,450,439
========== ===========
As of April 30, 1994, net unrealized appreciation for Federal
income tax purposes aggregated $2,450,439, of which $9,972,049
related to appreciated securities and $7,521,610 related to
depreciated securities. The aggregate cost of investments at
April 30, 1994 for Federal income tax purposes was $363,776,656.
4. Capital Stock Transactions:
The Fund is authorized to issue 200,000,000 shares of capital
stock, including Preferred Stock, par value $.10 per share, all
of which were initially classified as Common Stock. The Board of
Directors is authorized, however, to reclassify any unissued
shares of capital stock without approval of the holders of Common
Stock.
Common Stock
For the six months ended April 30, 1994, shares issued and
outstanding remained constant at 16,781,559. At April 30, 1994,
total paid-in capital amounted to $235,467,877.
Preferred Stock
Auction Market Preferred Stock ("AMPS") are shares of Preferred
Stock of the Fund that entitle their holders to receive cash
dividends at an annual rate that may vary for the successive
dividend periods. The yields in effect at April 30, 1994 were as
follows: Series A, 2.74% and Series B, 2.75%.
In connection with the offering of AMPS, the Board of Directors
reclassified 2,400 shares of unissued capital stock as AMPS. For
the six months ended April 30, 1994, there were 2,400 AMPS shares
authorized, issued and outstanding with a liquidation preference
of $50,000 per share, plus accumulated and unpaid dividends of
$92,433.
The Fund pays commissions to certain broker-dealers at the end of
each auction at the annual rate of one-quarter of 1% calculated
on the proceeds of each auction. For the six months ended April
30, 1994, MLPF&S, an affiliate of MLIM, earned $124,006 as
commissions.
<PAGE>
5. Subsequent Event:
On May 6, 1994, the Fund's Board of Directors declared an ordin-
ary income dividend to Common Stock shareholders in the amount of
$.078198 per share, payable on May 27, 1994 to shareholders of re-
cord as of May 17, 1994.
PER SHARE INFORMATION
<TABLE>
Per Share Selected Quarterly Financial Data*
<CAPTION>
Net Unrealized Dividends/Distributions
Investment Realized Gains Net Investment Income Capital Gains
For the Quarter Income Gains (Losses) Common Preferred Common Preferred
<S> <C> <C> <C> <C> <C> <C> <C>
May 1, 1992 to July 31, 1992 $.31 $.06 $ 1.07 $.30 $.07 -- --
August 1, 1992 to October 31, 1992 .30 .04 (1.25) .25 .06 -- --
November 1, 1992 to January 31, 1993 .31 .03 .85 .25 .05 $.08 $.02
February 1, 1993 to April 30, 1993 .31 .01 .70 .24 .05 -- --
May 1, 1993 to July 31, 1993 .30 .01 .22 .24 .04 -- --
August 1, 1993 to October 31, 1993 .31 .03 .77 .26 .05 -- --
November 1, 1993 to January 31, 1994 .31 .13 .02 .26 .04 .07 .01
February 1, 1994 to April 30, 1994 .30 .36 (2.24) .24 .05 -- --
<CAPTION>
Net Asset Value Market Price**
For the Quarter High Low High Low Volume***
<S> <C> <C> <C> <C> <C>
May 1, 1992 to July 31, 1992 $15.39 $14.19 $15.375 $13.875 1,076
August 1, 1992 to October 31, 1992 15.19 13.90 15.375 14.125 955
November 1, 1992 to January 31, 1993 14.83 14.05 14.875 14.25 997
February 1, 1993 to April 30, 1993 16.00 14.53 15.50 14.625 1,387
May 1, 1993 to July 31, 1993 15.96 15.49 15.50 14.625 1,329
August 1, 1993 to October 31, 1993 16.80 15.80 16.375 15.125 2,021
November 1, 1993 to January 31, 1994 16.68 16.07 15.875 15.00 1,867
February 1, 1994 to April 30, 1994 16.62 14.35 15.875 13.125 2,112
<FN>
* Calculations are based upon shares of Common Stock outstanding
at the end of each quarter.
** As reported in the consolidated transaction reporting system.
*** In thousands.
</TABLE>
<PAGE>
OFFICERS AND DIRECTORS
Arthur Zeikel, President and Director
Kenneth S. Axelson, Director
Herbert I. London, Director
Robert R. Martin, Director
Joseph L. May, Director
Andre F. Perold, Director
Terry K. Glenn, Executive Vice President
Donald C. Burke, Vice President
Vincent R. Giordano, Vice President
Kenneth A. Jacob, Vice President
Gerald M. Richard, Treasurer
Mark B. Goldfus, Secretary
Custodian
The Bank of New York
110 Washington Street
New York, New York 10286
Transfer Agents
Common Stock:
The Bank of New York
101 Barclay Street
New York, New York 10286
Preferred Stock:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
NYSE Symbol
MYC
